With its share price at 2,516p, Shell (LSE: SHEL) has dropped by around 17% since May. But the forward-looking dividend yield for 2025 is now around 4.5%.

So that high yield means the oil, gas and energy company may be a decent buy to consider for income.

Today’s (31 October) third-quarter results look encouraging, with an improvement in revenue. But the overall performance of the business in the first nine months of the year helps to explain the stock’s weakness. 

Mixed results this year so far

For example, income attributable to shareholders declined by 20%. The company said refining margins in the third quarter were lower than those in the second quarter. On top of that, realised oil prices declined and operating expenses increased. 

All of that sounds like a never-fail recipe for shrinking profits. Nevertheless, favourable tax movements and higher integrated gas volumes partly mitigated the damage.

But it wasn’t all bad news. Cash flow from operations was steady and the company increased shareholder dividends for the period by 9%. It also announced today a programme of share buybacks.

Since the pandemic year in 2020, the story on dividends has been encouraging, with multiple double-digit percentage annual increases. However, the shareholder payment still falls short of pre-pandemic levels. Meanwhile, City analysts expect modest single-digit advances this year and next.

Is Shell a decent buy for dividend income? Maybe. There’s an ancient stock market mantra that investors used to chant: “Never sell Shell.“

However, that was decades ago when oil was a sexy and exciting sector and even the clumsiest stock purchases often led to decent profits for shareholders.

An uncertain road ahead

Nowadays, the picture is less clear. Some are worried the oil and gas sector itself may stage a long-term decline. Meanwhile, it’s uncertain how well the company can reshape its operations for the future. 

On top of that, the cyclicality in Shell’s business is undeniable and one outcome of that is the long-term performance of the stock. Over the past 20 years its risen by about 72% with many ups and downs along the way. 

Of course, there have been dividends for shareholders, but they’ve cycled up and down too. Overall, the two-decade returns look disappointing to me. Factors such as cyclicality may lead to a similar outcome over the next 20 years. I see that as a risk for investors.

But the 4.5% yield looks tempting. Nevertheless, it’s not attracting me as much as Legal & General‘s, which is above 9%. Although the financial company comes with its own cyclical risks. Nevertheless, the firm’s multi-year dividend record is stronger than Shell’s.

I’ve also got Supermarket Income REIT on my watch list with its yield above 8% and Renewable Infrastructure yielding well above 7%.

When it comes to dividend income, I reckon it’s important to diversify between several stocks. Meanwhile, there’s a good chance Shell’s strong performance on operating cash flow can help to keep the dividends arriving. So on that basis and if I had spare cash, I’d consider researching and investing in Shell shares now.